Supply Chain

Top 5 Scope 3 Hotspots in Retail Value Chains

Leading retailers are rethinking inputs and partnering with both suppliers and competitors to tackle tricky value chain emissions.

Sponsored Content | This article is sponsored by EDF | By Ellen Shenette | Published 3 months ago | About a 6 minute read

Image: Oleksandr Ryzhkov

From cotton fields and cattle ranches to overseas factories, shipping routes, store shelves and living rooms — a single retail product can pass through dozens of hands and thousands of miles before it reaches the customer. That complexity is exactly what makes reducing value chain — or Scope 3 — greenhouse gas emissions so challenging. And the scale is what makes addressing it essential: For many retailers, these emissions from upstream and downstream processes make up nearly 98 percent of their climate impact.

No longer is reducing value chain emissions just about compliance and reputation. It’s increasingly linked to core business value — helping companies mitigate supply chain risks, meet investor expectations, improve operational efficiencies and respond to shifting consumer demands.

But tackling Scope 3 is complicated as emissions coming from supplier factories, farms or consumer use are outside their direct control. Still, progress is possible. Leading retailers are starting to identify the biggest hotspots and deploy levers including supplier engagement, internal governance and cross-industry precompetitive collaboration to drive impact.

Here are the five value chain hotspots every retailer should be addressing now:

1. Packaging

Packaging decisions are deeply tied to Scope 3 — both in terms of upstream material impacts and downstream waste and disposal. Retailers can directly influence packaging choices and understand the important role they play in consumer decision-making.

Business efforts range from redesigning for recyclability, reusability or compostability to switching to recycled content to reducing packaging altogether. Retailers must navigate tradeoffs in cost, functionality and emissions — yet this navigation pays off, as consumers increasingly demand sustainable packaging: A 2023 survey of 9,000 North American, South American and European consumers found that over 80 percent will pay more for sustainable packaging.

At the same time, companies are facing growing policy pressure from Extended Producer Responsibility (EPR) laws in the US and EU requiring them to take responsibility for the full lifecycle of their packaging. This makes packaging not just a sustainability priority, but a growing compliance and cost-management concern.

Key challenge: Stakeholder expectations vary — what customers want, what infrastructure can handle, and what regulations require don’t always align. Learn more here.

2. Circularity: Reuse, repair and end of life

End-of-life emissions from landfilling, incineration or other disposal methods are another area where retailers can lead. Programs that extend product life — such as resale, rental and repair — are gaining traction across multiple retail sectors.

Retailers are learning what resonates with consumers and how to make the business case internally for circular offerings. These programs often bring co-benefits: brand loyalty, customer engagement and reduced materials demand. For example, Madewell’s denim take-back program incentivizes customers to return products at end of use by offering store credit; the company then uses those materials as housing insulation for communities in need.

Key challenge: Scaling circular programs requires cross-functional coordination and clear metrics for success. Learn more here.

3. Freight and logistics

Retailers rely heavily on third-party logistics providers to move goods, often by road. This makes freight a significant emissions source that, if unaddressed, is on track to become the highest-emitting sector sector by 2050. Yet, fleet decarbonization is an actionable, quantifiable and reportable way to reduce emissions today — especially since the majority of US freight routes are under 250 miles and alternative vehicles are available at a relatively low additional cost with substantial total cost of ownership savings over the asset's useful life.

Companies are experimenting with ways to encourage or require lower-emission transport options — from shifting to electric or alternative fuel vehicles to rethinking routes and consolidation strategies. Some retailers with owned fleets are using them as testbeds for innovation, with lessons that can extend to third-party carriers.

Key challenge: Retailers don’t always directly control freight operations, so building alignment with logistics partners is key. Learn more here.

4. Supplier manufacturing and renewable energy

Retailers source goods from thousands of factories around the world — many in regions still reliant on fossil fuel power. Helping suppliers switch to renewable energy is one of the highest-leverage ways to cut supply chain emissions — but not always the easiest.

Some retailers are joining buyer coalitions, embracing collective-financing models or engaging in region-specific programs to help manufacturers access clean energy options — from rooftop solar to offsite power purchase agreements. Others are providing tools and incentives for suppliers to assess and reduce their energy-related emissions.

Key challenge: Many suppliers face infrastructure, financing, or policy barriers to adopting renewables. Collective action can help unlock new solutions. Learn more here.

5. High-impact agricultural commodities

From cotton and cocoa to dairy and beef, agricultural inputs are a major source of emissions for food, apparel and beauty retailers. These upstream emissions are invisible in end products, but they’re among the hardest to reduce — and increasingly in the public spotlight.

Retailers are exploring ways to shift sourcing strategies and work with suppliers and producers to support more sustainable, lower-emission farming practices. Some are investing in regenerative agriculture pilots, while others are building supplier partnerships that reward performance improvements. For example, Walmart and PepsiCo have teamed up to accelerate adoption of regenerative agriculture practices on more than 2 million acres of farmland across the US and Canada and eliminate roughly 4 million metric tons of GHG emissions by 2030.

Key challenge: Retailers often don’t have direct relationships with farmers, making influence tricky. Traceability, collaboration and shared investment are essential. Learn more here.

Making it happen inside your company

Tackling Scope 3 requires coordination across teams, long-term supplier partnerships, and the buy-in from the C-suite to invest in projects where direct control is limited. But it’s also where some of the biggest opportunities lie — to meet climate goals, build more resilient supply chains and future-proof the business.

Retailers don’t have to go it alone. EDF’s Net Zero Action Accelerator offers leading-edge resources to help you reach your goals and translate risks and benefits across the enterprise.

Each month, EDF curates key resources from the Net Zero Action Accelerator that help drive real impacts on the ground. Sign up for our newsletter for insights on the latest science, tips and events to stay ahead of the curve.